Meet the obscure federal regulator who's not helping homeowners

View full sizeBloomberg News photo by Chris RankThe most powerful man in housing policy today is a little-known bureaucrat named Edward DeMarco.

By Cora Currierm ProPublica

Last week, ProPublica and NPR raised questions about a risky investment strategy at Freddie Mac that would pay off if homeowners stayed trapped in expensive mortgages. It's just the latest example of how government-owned Freddie Mac and Fannie Mae have frustrated many by not putting homeowners first.

Fannie and Freddie are required to help homeowners while earning profits so they can pay back the taxpayers who bailed them out. Here is our guide to the little-known federal regulator, Edward DeMarco, ultimately in charge of the two companies. You may have never heard of him, but as The Washington Post put it, he's "the most powerful man in housing policy."

As head of the FHFA, DeMarco has a three-part mission: to promote the soundness of Fannie and Freddie, and to support affordable housing and a stable and liquid mortgage market (in other words, to expand access to home ownership loans and make it easier to buy and sell mortgages).

The last two goals, though, can clash with the fact that under the bailout, DeMarco is the "conservator" of Freddie and Fannie, meaning he has to protect their finances for the benefit of their shareholders. (And the majority shareholder is now the federal government.) According to The Washington Post's Brad Plumer and Ezra Klein, there is "a conflict tucked deep into DeMarco's job description: The head of the FHFA is stuck between the narrow needs of Fannie and Freddie and the broader needs of the housing market."

DeMarco has focused almost solely on that first goal, telling Congress many times that "as conservator, FHFA has a statutory responsibility to preserve and conserve the enterprises' assets." In plainer terms, he told NPR last week that his role is to "make sure Fannie Mae and Freddie Mac undertake activities that don't cause further losses for the American taxpayers."

DeMarco has strongly asserted his independence, insisting that he is promoting needed fiscal discipline. (He did not respond to our latest requests for comment on his role with the FHFA).

The Obama administration has repeatedly tried to push principal reduction — reducing the size of a borrower's mortgage — as a way to help homeowners, especially those with homes worth less than their mortgages. But as ProPublica and others have reported, time and again, Fannie and Freddie wouldn't participate: a crippling problem, since the two companies own or guarantee about half of the country's mortgages.

Last month, the administration unveiled yet another plan to encourage principal reduction, but a former administration adviser called DeMarco "the boulder" in the way of making it happen.

Last week, DeMarco described his job as a "balancing act." It's certainly thankless. While Democrats have called for DeMarco's head, the FHFA is an independent agency, meaning the Obama administration can't just get rid of him over policy disputes such as his stance on refinancing or principal reduction. He could also be replaced if Obama decides to offer another nominee and the Senate confirms the choice. Barring that, DeMarco will likely remain where he is for some time, walking his own line on Fannie and Freddie's contradictory mission.